Law Practice Management Asked and Answered Blog

Category: Strategy

Mar 20, 2012

Law Firm Staff Investment – A Sound Marketing Strategy

Question:

Our Chicago firm of 14 attorneys has been discussing various marketing investments that we should be considering. We have a very proactive marketing program but want to insure that we are exploring all avenues. What are your thoughts?

Response:

Invest in your people – your staff – your intellectual capital.

I am amazed at the minimal investment that law firms make in their staff. Law firms are in the knowledge business and their product is their intellectual knowledge. While law firms do invest in their attorneys, such is not the case with the staff. Although staff members are often on the front lines in dealing with clients, very few law firms are providing them with skill training in areas such as communication, marketing, client service, conflict management, effective writing and speaking, time management, computer applications, client complaint management, etc. By the way, attorneys need training in these areas as well. Why do law firms hire the cheapest talent they can find to fill the receptionist position when it is the receptionist who often has the initial contact with a new client. I find it amazing that firms spend huge amounts of money on advertising and marketing and they fail to invest in the other tools needed for effective new client intake. Small firms should consider assigning their receptionist the role of marketing coordinator with responsibility for assisting in the management of client relationships and the firm’s marketing program.

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John W. Olmstead, MBA, Ph.D, CMC

Mar 07, 2012

Growing a Law Firm: Issues to Think About

Question:

Our practice is located in Memphis. We have three attorneys, 3 paralegals, and two staff members. We will generate $1,500,000 in legal fees this year. We plan on growing the firm and hope break the $2.5 million barrier in three years. We have a very proactive marketing plan and program. What else do we need to think about?

Response:

Growth will involve more the marketing and getting more clients. Particularly a firm your size. To generate this revenue you will have to add several revenue producers which could almost double your size. Your will become a different firm. Instead of three attorneys – you may have six or seven unless your growth will occur by adding mostly paralegals. Even so, there will be more people. This will impact your physical facilities and physical plant, your systems, your IT infrastructure, approach to talent management, and how the firm is managed. Growth requires investment and puts strain on cash flow. So this needs to be planned for. If you don't have a strategic plan (see our blog under strategy section) I suggest that your consider developing one. A strategic plan will require you to think beyond the marketing plan and getting clients – and address all of the other issues that will impact the firm as you grow.

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John W. Olmstead, MBA, Ph.D, CMC

Feb 21, 2012

Law Firm Strategic Plans: Are They Practical For Small Law Firms?

Question:

I am the managing partner of a 12 attorney firm in Chicago. We have been considering whether we should develop a strategic plan for the firm. We have problems even having partner meetings on a consistent basis and those often yield questionable results. What are firms doing? Does a strategic plan make sense for a firm like ours?

Response:

According to recent surveys, 70+% of the responding law firms (ranging in size from the largest to 45 attorney firms) have formal written strategic plans. Smaller firms have a much lower experience. In our experiences with smaller law firms we are finding that fewer than 15% have formal written strategic plans. I consider success to be achievement of measurable results as evidenced by achievement of the goals and objectives outlined in the plan and actual implementation of action items. Lawyers and law firms seem to do better at planning than they do at implementation. Larger firms usually are more successful in implementation due to availability of management resources, leadership and functional governance. Smaller firms tend to have problems with implementation. In fact, we frequently recommend that a firm address other management issues prior to engaging in strategic planning. If a firm is having problems implementing day-to-day operational decisions the firm will not be effective in implementing strategic planning initiatives.

You might want to get your operational house in order first and resolve day-to-day operational management issues first and then move on to the future.

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John W. Olmstead, MBA, Ph.D, CMC

Jan 10, 2012

Starting a Law Practice: Challenges and Tips – Phase I

Dec 28, 2011

Goals and Plans For Focusing the Law Firm in 2012 and Beyond

Question:

Our firm, a 12 attorney firm in Detroit, needs to find a way to improve fee revenues and financial performance in 2012. We do not have a business or strategic plan, have never had a retreat, and we don't even have a budget. We believe that we must do something for 2012 and yet we are out of time since 2012 begins next week. Any suggestions?

Response:

Generating adequate fee revenue is the primary challenge for most law firms and this is where I would start for 2012.

I am a strong believer in the power of focused goals and objectives when integrated with a system of accountability. I have clients that have improved fee revenue by 20% (over a two-three year period) with existing headcount simply by establishing production goals for each attorney and paralegal in the firm – reporting, measuring and reporting goal v.s. performance monthly using simple reports, and follow-up with individuals behind on their goal attainment. Solo practitioners can use the same system and use a staff member, spouse, or coach to serve as an accountability partner. You might want to consider the following:

1. Ask each attorney and paralegal to provide SMART (specific, measurable, attainable, realistic, and on a timeline – i.e 2012) goals for fee generation, fee origination, billable hours, etc.
2. Review and discuss these goals with each member and engineer an agreement (commitment). Insure that there is adequate stretch – but that the goals are attainable.
3. Setup a monthly report, spreadsheet if necessary, listing each individual and including their monthly goal number(s), actual performance, variance, year to date goal number(s), actual performance and variance.
4. Review and discuss monthly at firm meeting, management committee meeting, or whatever forum is appropriate for your firm.
5. Follow-up and meet with individuals that are falling behind. Devise strategies for improving performance or revise goals if unrealistic.
6. If the firm has insufficient client work use this as a tool to bring out into the open and create specific business development initiatives to deal with such issues.
7. Find ways to tie attainment of goals to compensation.

Try to get this in place by January 1, 2012 and see how this works for you and consider this your first baby step. Down the road you might want to consider a firm budget and eventually a strategic plan. See Helen Gunnarsson's article on strategic planning in the November issue of the Illinois Bar Journal.

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John W. Olmstead, MBA, Ph.D, CMC

Nov 08, 2011

Diversifying a Personal Injury Plaintiff Law Firm

Question:

Our firm is a personal injury plaintiff law firm located in Austin, Texas. We have 4 attorneys in the firm and all are partners who have been practicing for over 25 years. One hundred percent of our practice is PI plaintiff. We have been extremely successful over the years and handled some very large cases, have had some big wins, and handled several class action cases. Our current challenge is cash flow. The cases we are involved with seem to be bigger and more complex with fewer smaller cases that can be resolved quickly and contribute to cash flow. We are getting in deeper to our line of credit. Of late we have been discussing pros and cons of diversifying the practice and adding a non-PI practice area to our practice. What are your thoughts? Have you seen PI plaintiff firm do this successfully?

Response:

More and more of our PI plaintiff law firm clients have been raising this question during the past year. While a lot can be said about specialization – a firm can also sometimes be too specialized. I have seen many hybrid firms over the past 20+ years that have successfully combined a plaintiff personal injury practice with a transactional practice. As one firm told me "us transactional folks bill the hours and pay the bills while we turn the PI folks loose to go after the big hits." Firms that operate the firm as a "firm-first" firm tend to be more successful with such a practice mix than do firms that are "long ranger" firms operating as a collection of individual practitioners. In these firms compensation can become difficult and divisive due to the large swings that can occur in contingency fee work. However, firm-first firms look beyond this year's fee production, carry their contingency fee brothers and sisters when their numbers are down, and share the wealth when the big hits come in. Marketing and advertising came be more challenging – but it can be done. Practice areas might include commercial litigation, employment discrimination, business transactions, etc. High-end family and criminal practices have also been good candidates as well. It is not so much the type of practice as it is the type of practitioner and whether then be a good "cultural fit" with the PI folks.

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John W. Olmstead, MBA, Ph.D, CMC

Oct 26, 2011

Competitive Strategy for a Personal Injury Plaintiff Law Firm in Today’s World

Question:

We are a five attorney personal injury plaintiff firm in the central Missouri. In the last few years we have gone through tort reform, increase competition from other law firms doing extensive advertising, and now trying to weather the recession. From a profitability standpoint – we are holding our own. However, we are concerned about the future. What are your thoughts for firm such as ours?

Response:

We are hearing this question quite often and have provided some thoughts in past blogs and articles.

The majority of our PI law firm clients are advising that they are having to work much harder at getting clients and investing more heavily in marketing – both time and money. PI firms were feeling the most of these challenges before the recession. However, the recession may accelerate the pace with which law firms reevaluate existing processes and consider new business models. PI firms may want to begin by:

1. Develop a firm strategic plan and individual attorney marketing plans which include aggressive network/contact plans for past clients, attorney referral sources (non PI attorneys), attorney referral sources (other PI attorneys), and other referral sources.

2. Evaluate the feasibility of adding an additional practice segment to reduce the level of risk in the case portfolio and reduce cash flow variability.

3. Reduce case portfolio risk and improve case profitability by implementing a case intake system whereby all new cases over a specified level of projected case value are reviewed and approved by the partnership (or a client intake committee) in order for the case to be accepted by the firm. In other words – don't let one attorney expose the entire firm to either excessive levels of case risk or case investment (time and client cost advances) without other partners having a say on the matter.

4. Analyze the profitability and return on each case and ascertain what can be done differently on future cases. Metrics might include effective rate, return on LOADSTAR, dollar case profit after allocation of all appropriate firm overhead, etc.

5. Review and measure present marketing investments (time and money) and determine what is working and what is not. Reallocate resources if appropriate.

6. Insure that you are using an appropriate mix of marketing tools in your program.

7. Consider increasing marketing investments (time and money). Suggest a marketing budget be developed in the range of 8-12 percent of fee revenue. Also suggest that non case production (non-billable) time be budgeted for business development and marketing activities as well.

8. Look into defensive advertising.

9. Insure that you have a first-class website that goes deep and demonstrates expertise.

10. Maintain a yellow page presence – but gradually reduce investment and shift into website and other online vehicles.

11. Find ways to enhance the client's experience and deliver exceptional client service.

12. Use exceptional client service and bedside manner as a primary means of differentiating you from your competitors. Under Promise – Over Deliver in everything you do for the client.

13. Make your office client friendly.

14. Use end-of-case satisfaction surveys to measure the client's experience with the firm and to improve future service.

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John W. Olmstead, MBA, Ph.D, CMC

Sep 21, 2011

Law Firm Strategic or Long Range Plans – Why Does a Small Firm Need One?

Question:

I have a small firm in Indianapolis. I am the only attorney in the firm and I have three staff members. I have been in practice for 30 years. I have been reading your posts on strategic planning. Why do I need one for a small practice such as mine?

Response:

A strategic or long range plan serves as the roadmap for your practice. When you go on vacation do you head out without a map, plan or your GPS. Probably not. The same should be true for your practice. A plan defines who you are, where the firm should be heading, and how you get there. It helps focus you as well as your staff and improves productivity, accountability, and alignment with your goals. It identifies what work your firm does (or sometimes more importantly) what it does not do. In essence it outlines what services your are selling, to who, and where. Your plan then lists out the steps you should be taking to move to your desired future.

I have seen solo practitioners time after time reach their 60s and realize that if they had it all to do over again they would do things differently. Often they have completely failed to put in place solid succession strategy and realize no value for their sweat equity when they retire. A plan or roadmap can help direct your efforts over the years.

The important thing is to it keep your plan simple and update it often. Ten pages or less – in outline form. I have seen excellent one page plans. When circumstances change – change it. Review it every month.

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John W. Olmstead, MBA, Ph.D, CMC

Jul 12, 2011

Expanding Law Practice into Insurance Defense

Question:

I am an 11-year attorney practicing at a small firm on the west coast. We currently focus on business litigation, employment litigation, corporate formation, bankruptcy, wills and trusts, and personal injury. We are trying to expand our practice into the area of insurance defense.  To that end, I have been sending out correspondence to insurance companies offering my services in defense of general liability, property/casualty, and employment practices claims.  My goal would be to develop a regular stream of business from these types of cases, and to cross-market our other services to clients that come through insurance defense referrals. I am not sure if I am going about this the right way, and would like to seek your counsel.

Response:

In all honesty I  have more firms asking how to diversify out of insurance defense into more self-insured and direct representation work. If you want to pursue this market you will need to become part of the club and do more than just dabble in this area. You will have to get on the "approved lists" of the various insurance companies. Once you are on these lists you have to entice claims manager to use you as opposed to other law firms that are on their approved lists. In other words establish relationships with numerous claims manager throughout the company. This is harder than it used to be due to policies that many companies now have prohibiting various forms of networking such as dinners, gifts, ball games, etc. Now days it seems that educational venues is one of the few formats that is not frowned upon. You may also find that some companies reluctant to work with a firm your size. I have advise by insurance companies that they like to see a certain level of bench strength (backup). The firm does not have to be a large firm but often the insurance company likes to see a minimum of four or five lawyers in a firm. You will have to have a track record of success, understand the business, and be able to accomodate the unique billing (including electronic LEDES billing), case management, and reporting requirements that insurance companies require.

Here are a few ideas to get started:

1. Become involved in every possible organization that involves insurance claims, ACCA, and other such groups.
2. Join and become actively involved in these groups.
3. Ofter to give speeches and presentations to these groups.
4. Develop relationships with news reports and have an effective public program that insures that you get all the PR you can when you have successful outcomes in your cases.
5. Speak at ACCA and RIMS (Risk Insurance Management Society) conferences.
6. Form alliances with bigger regional and national insurance defense firms.
7. Research target companies and make application to get on their approved lists.
8. Obtain listings in Best and Martindale.
9. Have a quality website that demonstrates expertise and a e-newsletter that provides information that will help claims managers and adjuster be more successful.

Good luck on your journey.

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John W. Olmstead, MBA, Ph.D, CMC

Jun 28, 2011

Model For Sustaining a Law Practice: Managing the S Curve

Question:

In a recent firm meeting the question was raised as to whether law firms hit a wall when they run up against new competitors, new technologies, new business models, or when their talent peaks. Is there a general model  of sustaining a law firm?

Response:

The mechanics of managing a law firm are too complex to address in this forum. It would be better to discuss what to tell you what to look for that tells you, well in advance of a fee revenue plateau, that your practice needs some work. Once you know where your practice is getting wobbly, then you will have a clearer idea of how to fix the mechanics.

We tell our clients that they are on an "S-Curve" in which slow and steady growth often occurs at the start of the law practice, followed by gaining momentum and rapid growth, then tapering off as practice areas get saturated or competitors enter the practice areas in which the firm is engaged. Watch these components for advance warning:

1. Competition – any practice area attractive to you will also attract other law firms, so monitor new entrants starting to chip away at your clients.
2. Capabilities – you created or bought some new technology, skills or other assets to start your firm/growth, but the distinctiveness of these eventually wears off and they are likely to be available to competitors once their value is clear.
3. Talent – you had it when you started your firm, but attorneys and staff have become "free agents" and increasingly move between law firms more frequently and you may lose a key asset.

There may be other components unique to your practice and market. The point is that there is more than meets the eye in a simple growth curve. Figure out exactly what assets and activities are part of your particular growth and watch each one, as well as how each component affects the others (e.g., a departure of talent from your firm to a competing law firm, along with knowledge of specific major case or a key technology is a triple blow.)

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John W. Olmstead, MBA, Ph.D, CMC

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